It’s a bit like that scholarship you wish you got for college
And if you did, good on you! When one receives a scholarship, the entity that provides it trusts the student in succeeding, and hopes that they will value this initial contribution to their career. It’s obviously a bit of a bet, since no one can really know what happens to the one who received the scholarship, and how they will use the opportunity. Investing isn’t much different, as an investor is someone who partially or wholly funds a project, organization, or company in the hope of a financial return in the future.
What is investing?
Let’s call it an educated bet. Investing means when a person, organization, or any kind of entity pays into something with the expectation that it will provide a financial return in the future. There’s two main types of investments. There’s debt investments, which are more like loans. Back to the college theme - you probably know what we are talking about if you took out a loan for university and need to pay interest on it. The return of this kind of investment is the interest one earns from the debt. The second type of investment is an equity investment, which means owning a share of a company which will eventually pay off dividends from their profits. This is the investment one makes when buying stocks, as one earns, along with the right to a portion of profits, an ownership status within the company one invested in.
Is it all luck?
It’s not all luck, but luck does play a role. Investing isn’t wishful thinking, as one is expected to make educated predictions on how a stock will perform. Some ways to do so are by looking at a company’s performance in the past, its team, and its competitors. An investor isn’t a trader, as they are thinking long-term gain. A trader, on the other hand, aims at short-term gains through selling and buying at the “right” times.
Why doesn’t everyone invest…
Reasons behind investing can be the wish to acquire more wealth, or just saving for retirement. We can’t really think of a bad reason to invest (but if you can, feel free to drop us a message), but we know people find many excuses not to invest. You may say you don’t have enough money to start investing, or that it “isn’t the time yet”, or that it is simply too risky. These are all fair points, especially for younger people who have a long time to save before retirement and want to "live in the moment". But the biggest risk one can take when young is exactly this: not to invest. When investing young, one can invest for the long-term gains and can withstand the ups and downs of the stock market. On top of this, one will naturally have more time to invest, and (hopefully) more money.
Why will your future self thank you
It’s difficult to put money aside to invest. Especially when one is just starting off a job, or wants to save up for something special (like a vacation, or that new gadget you really really want). But not investing may be one of the biggest regrets you'll have later on. By investing young, one will eventually get a return out of what was put in. For this reason, Bits of Stock has come up with a way for people to invest without needing to put money aside. If you want to find out how, just click here.
- 61% of parents prefer to discuss investments with their financial advisors rather than their adult children.
2. Money is the biggest stress in Americans’ lives.
3. Given the choice, 92% of people prefer being rich over finding the love of their lives.